Ireland takes a punt on banks

DUBLIN: The biggest financial gamble in modern Irish history is about to exit the realms of theory and enter the real world.

Lawmakers were yesterday expected to pass a bill creating a so-called bad bank that will pay the country's biggest banks 54 billion euros ($81 billion), or about a third of gross domestic product, for property loans to free up lending. The agency plans to start buying loans by the end of the year, according to a plan published last month.

Finance Minister Brian Lenihan is seeking to end a crisis that's wiped 70 percent from the country's benchmark stock index, sent bond spreads soaring to the highest in at least a decade and destroyed Ireland's status as Europe's most dynamic economy. Real-estate prices have on average dropped 50 percent since peaking in 2007, and bad debts at lenders led by Bank of Ireland Plc and Allied Irish Banks Plc are surging.